6.3 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for General Administration and Financial Services is patient services revenue, while the cost driver for Facilities is space utilization. a.What are the appropriate allocation rates? b. Use an allocation table similiar to to exhibit 6.7 to allocate the hospital 's overhead costs to the patient services departments.

3,000,0oo Financial Services follows: Patient Services Revenue Space Square Feet) Housekeeping Salary Labor Hours Dollars Department Support General 2,000 $1,500,000 10,000 Administration Facilities Financial Services 20,000 15,000 45,000 5,000 3,000 10,000 3,000,000 2,000,000 $6,500,000 Total Patient Services: Routine Care Intensive Care Diagnostic Services Other Services 400,000 40,000 60,000 100,000 $50,000,0oo 00,000 $30,000,0oo 4,000,000 6,000,000o 10,000,000 150,000 30,000 15,000 25,000 220,000 $12,000,000 5,000,000 6,000,000 7,000,000 $30,00o,000 Total $50,00,00 645,000 Grand total 230,000 $36,500,00o